China’s shipbuilding industry dominates the market. Will the EU be empty docks in 3 years?

By Marek Grzybowski

China intends to increase the production potential of the shipbuilding industry by 80% By 2027, its production potential will exceed the production capacity of EU shipyards several times over. With contracts for over 3,200 ships, Chinese shipyards have a 56% share of the global order book by CGT tonnage. For a decade, Chinese shipbuilders have been entering new, technologically advanced projects. In 2024, the Chinese order book for shipbuilding reached record levels and there is no indication that this will change. Europe is third, with an 11% market share.
A spectacular example of Chinese success is the achievements of shipyards associated with China’s Association of the National Shipbuilding Industry – CANSI. In 2024, CANSI shipyards obtained almost 75% of all orders from shipowners, including European ones. CANSI’s contract book contains a total of 87.11 million dwt of several types of bulk carriers, container ships, tankers and other ships.
Clarksons recently reported that China’s order book in October amounted to 3,202 ships (of 1,000 gt or more) with a total tonnage of 83.4 million CGT. This is almost three times more than at the end of 2020. In 2024, Chinese shipbuilding corporations will exceed the record from October 2008 by 9%.
Source: Christopher Pålsson, Managing Director, Partner at maritime-insight, 2024

In terms of ship deliveries, orders for new construction and order book, China’s market share was 55%, 74.7% and 58.9%, respectively, in the first half of 2024 – according to calculations by BRS experts. According to BRS data, 11 Chinese shipyards have announced plans to increase their production capacity. This should increase their total production capacity by 80% from 2024 to 2027.
The data after the first three quarters of this year, which were officially announced in the CANSI press release, already predicted a record year. When Chinese representatives published data on the activity of the Chinese shipbuilding industry in the first nine months of 2024, it sparked further protests in the EU, the United States and Canada. At the Maritime Economy Forum in Gdynia, Christophe Tytgat, Secretary General, CEO of SEA Europe & CESA, argued that Chinese shipyards use unfair practices to gain market share.- Chinese shipbuilders currently have more than 50% of ships on order in all types of ships, even ferries, LNG tankers, LPG tankers and others – Christopher Pålsson, Managing Director, Partner at maritime-insight, warned before the SMM trade fair in Hamburg. Cruise ships are the only ship segment where China’s presence is small. Chinese shipbuilders are trying to increase production capacity to meet the expected future demand, so China will continue to dominate the shipbuilding market in the coming years – warns Pålsson and provides all-speaking graphs.

Source: BRS, 2024

Chinese dominance, European complaints
– If you look at the order book, you can see that 50% of orders this year went to China, 25% to South Korea. Europe is third, but unfortunately has only 11%. If you look at the value of orders, it is even worse – China has almost 62% of the value, Korea 20% and Europe 12% – Tytgat warned. We provide more information about this here
The Chinese authorities, informing that shipyards have dominated the market for new ship orders, emphasize that China and has expanded its global leadership. The data on new contracts has undoubtedly caused a negative mood in many markets. Groups of shipyards and their organizations in the European Union, the United States and Canada are protesting against China’s dominance in shipbuilding. Canada implemented a rescue program for its domestic shipbuilding industry several years ago. It was based on domestic government orders. We wrote more about it here

Shipyard workers from South Korea with a 26% share and the Japanese with less than 10% of the market share seem to have already come to terms with their neighbor’s dominance. The China Association of National Shipbuilding Industry (CANSI) reported that thanks to the fact that shipyards have obtained almost 75% percent of all shipowner contracts, in 2024 the volume of new ship orders increased by almost 52% compared to 2023. As a result, the PRC shipyards are still increasing shipbuilding production. It has been calculated that 61.4% of global orders for new construction will be fulfilled in Chinese docks, or a total of 193.3 million dwt.

The CANSI report emphasizes that China is currently the leader in orders for 14 of the 18 main types of ships and that many of its shipyards are exceeding their annual targets. Shipyard groups are launching additional production capacities. In the recent period, shipyard workers from China have increased shipyard production by over 18%. In the first nine months of 2024, it was possible to obtain both labor and technology for great dynamics and activity. And most importantly – financing for ship production for shipowners from around the world. Let us emphasize that European banks are also beneficiaries of this Chinese acceleration and consumers of an increasingly large cake. And it is impressive. In the course of 9 months of this year, Chinese shipyard workers completed the production of ships with a deadweight of 36.34 million tons – informs CANSI.

Source: Christopher Pålsson, Managing Director, Partner at maritime-insight, 2024

Mature logistics and further consolidation

Prices are not the only factor in choosing Chinese shipyards. Such a high rate of growth in shipbuilding production was possible because the logistics chain of supply to the shipyards is already fully mature. The ability of Chinese shipyards to deliver ships on time is emphasized. Efforts to reduce production costs in all elements of the production chain are also effective.

Critics of the Chinese shipbuilding industry claim that it is heavily state-controlled and subsidized. It is noted that commercial shipbuilding is used to support the shipbuilding industry for the Chinese Navy. We write about this extensively here
China State Shipbuilding Company (CSSC) is taking advantage of the boom and consolidating its forces and production logistics. This state-controlled company is already playing a decisive role not only on the domestic market. It is also a decisive player in the international market, as illustrated by the above data. The group has therefore taken the initiative for another acquisition. It will absorb China Shipbuilding Industry Corporation (CSIC). A group of shipyards that builds not only ships but also marine structures and vessels, including submarines.

Founded in July 1999, China Shipbuilding Industry Corporation (CSIC) is a leading state-owned enterprise and one of China’s largest groups engaged in shipbuilding and ship repair. CSIC’s plants produce a wide range of land structures.
– CSIC is one of the largest business groups operating under central management and has the authority to manage its own finances and investment strategy. CSIC is also the only company in the Chinese shipbuilding industry listed on the Fortune Global 500 list. The total value of the group’s assets is USD 62.95 billion. The total number of CSIC employees is about 150,000 – informs the management of China Shipbuilding Industry Corporation.
2024 – Breakthrough in gas carriers, innovations in container ships
Although South Korea is a significant competitor to China, despite repeated rescue programs of the government in Seoul, it has lost its position as a market leader. In September 2024, South Korean shipyard groups obtained only 12% of contracts from the global order book for new commercial ships – informed Clarkson Research.

The volume of orders fell by 25% year-on-year. In the 9th month of this year, 90 ships were contracted, of which 65 went into production in China and only 14 to the docks of South Korea. China signed contracts for 2.48 million CGT compared to only 340 thousand CGT for Korean shipyards.
South Korean shipyards still dominate the gas carrier segment. But their position is clearly weakening. Chinese shipyards now have a 32% share of the LNG carrier order book, up from 14% at the end of October 2020 and just 1% in 2008. In the first week of October 2024, contracts for no fewer than 12 LNG carriers, four 96-metre offshore service vessels and up to six chemical tankers were placed with Chinese shipyards.

At the end of October, Cosco Shipping signed a contract with Hudong-Zhonghua Shipbuilding for the construction of six 336-meter container ships with a capacity of 13,600 TEU, which are to be delivered in 2027. The contract is estimated at at least USD 900 million, according to current prices for new ships with innovative propulsion installations.
The value of the contract may be subject to some correction, because the new ships will be powered by conventional fuel. Scrubbers have returned to favor with shipowners. This solution is very popular among tanker operators. We write about it here [https://www.gospodarkamorska.pl/juz-ponad-polowa-duzych-tankowcow-ma-skrubery-81489]
China Merchants Heavy Industry (Jiangsu) is implementing a contract for the construction of the world’s 12 largest car carriers, the first of which arrived at the port of Hamburg in October. Built for Höegh Autoliners, the 9100-CEU Höegh Aurora car carrier has engines powered by gas from an LNG plant. The engine is ready to burn ammonia.

Chinese shipbuilders are preparing to build more mega container ships, larger than those currently in service. . Ningbo-Zhoushan, the world’s largest port on the East China Sea, is preparing quays to accommodate 32,000-TEU vessels. The Shenzhen port in Yantian is also building new quays capable of handling container ships of this size. These giant ships will likely sail the Asia-Europe route, operators predict.

China plays green for green
The Chinese shipbuilding industry accelerated its green transformation in 2023. It was helped in this by shipowners from all over the world, including from the European Union and Poland. Orders for green ships powered by gas and methanol have grown rapidly. There has been a jump in orders for zero-emission ships, including those equipped with electric and hybrid systems or powered by hydrogen fuel. New orders for eco-powered ships accounted for 57%, MIIT reports.

Chinese shipyards are greener than those in Europe and the US. It turns out that Europe is not dominating the construction of eco-friendly ships. China has taken over 70% of global orders for eco-friendly ships and achieved full coverage of all major ship types in the first three quarters of 2024, according to information published by the Ministry of Industry and Information Technology (MIIT) a few days ago.

Thanks to green technologies and high-value-added ships, Jiangsu Province exported a diverse range of ships worth 69.27 billion yuan (9.78 billion dollars) in the first eight months of this year. This means that the export of the shipbuilding industry increased by 75.1% year-on-year, MIIT reports, citing data from the PRC Customs Service. In the first three quarters of this year, China’s shipbuilding production reached 36.34 million tons, an increase of 18.2% compared to the first three quarters of 2023 – MIIT reports that innovative ships with ecological drives dominate here.

Yangzijiang Shipbuilding Group
Hu Tieniu, a researcher at the Marine Design & Research Institute of Shanghai Jiao Tong University, said the significant increase [innovative ship production – MG] highlights China’s activeness in promoting the construction of environmentally friendly ships, meeting the growing global demand for environmentally friendly ships, the government portal www.gov.cn reports.
“Chinese shipbuilders have made significant progress in implementing green technologies, increasing the competitiveness of the industry and strengthening the country’s position as a leading shipbuilding power in the world,” Yu Mengsa, a researcher at the China Ship Scientific Research Center in Wuxi, eastern China’s Jiangsu Province, said in the same portal.

According to MIIT data, “out of 18 major types of ships, such as container ships and tankers, China ranked first in terms of new orders, with 14 types signed in the nine months of this year. Shipyards across the country have already exceeded their business targets for the year, driven by growing market demand.”

For example, Shanghai-based Hudong-Zhonghua Shipbuilding (Group) Co Ltd, a subsidiary of China State Shipbuilding Corp, (CSSC), delivered 17 ships to shipowners from January to September, and a record delivery of eight LNG carriers is expected by the end of the year.

China’s ‘Stakhanovites’ – 200% of quota
“With 34 new ships under contract, we have achieved 200% of our annual target for this year, and our production schedule is secured until around 2030,” said Weng Hongbing, chairman of Hudong-Zhonghua Shipbuilding Group. Cao Bo, deputy director of the statistics and information department at the Beijing-based China Association of the National Shipbuilding Industry, said that in response to changes in supply and demand, green transformation has become a major trend in China’s shipbuilding industry. “Faced with the new emission reduction requirements, shipping companies, leading shipyards and major energy companies have begun to lead, provide or invest in various solutions,” Cao said, noting that “Energy-saving, environmentally friendly ship designs and a range of power options, including methanol, ammonia and hybrid systems, are gradually maturing or rapidly moving towards commercialization.”

Earlier this week, five 40,000-ton self-unloading bulk carriers were unveiled at the R&D unit of CSSC Chengxi Shipyard Co Ltd in Jiangyin, Jiangsu Province. This is an advanced stage in the design and transition to production of the new vessels.

Huang Gang, sales manager of the company, explained that self-unloading bulk carriers are different from conventional bulk carriers because they are high-value vessels for the operator, ports and shipping customers. The advantage of such bulk carriers is that they provide exceptional unloading efficiency and are adaptable to different ports and sea conditions. The ships are equipped with unloading arms that allow them to unload “autonomously.”
– A single unloading system can achieve an unloading capacity of more than 5,500 tons per hour, which means that a 26,000-ton self-discharging bulk carrier can be unloaded in five hours, while a standard bulk carrier usually needs two to three days to complete the same task, Huang Gang emphasizes.

Source: S&S Insider, 2024
Fight for the shipyard cake – 200 billion dollars
The current higher prices for ships are an additional impetus to increase the activity of shipyards on the market. The situation was missed by European, American and Canadian shipyards. South Korean and Japanese shipyards are trying to maintain their market shares. Clarksons notes in one of its market analyses that the average size of ships ordered in 2024 is 54 thousand GT. This is 40% more tonnage than the average of 10 years. Ships are becoming more expensive because they are becoming more innovative and more expensive to build. New segments are growing, such as LNG and LPG gas carriers, ships for transporting hydrogen and ammonia, as well as container ships or ro-ro with dual-fuel engines, ready to be powered by methanol or ammonia. – The size of the shipbuilding market was estimated at USD 156.65 billion in 2023 and is expected to reach USD 204.35 billion by 2031 with a CAGR of 3.38% in the forecast period 2024-2031 – experts from S&S Insider predict.
China has maintained its leading position in the global shipbuilding market for the 14th consecutive year. It is entering segments previously dominated by shipyards from South Korea, Japan and Europe. LNG carriers and wind farm service vessels, i.e. high-margin units, are being built in the docks of Chinese shipyards. The Chinese shipbuilding industry has gained momentum and does not intend to slow down. In 2024, a program was launched to increase the total production capacity by 80% over the next three years. Closed shipyards are being reopened, and active ones are being expanded. Before the European Union wakes up and the United States and Canada introduce prohibitive tariffs, shipowners with their backs turned to domestic shipyards will be filling the halls and docks of Chinese shipyards with orders.